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Bank of America: comments on USD/CAD Wednesday, May 30, 2012 - 14:51 Analysts of Bank of America expect the Canadian dollar to fall to its lowest level since October as commodity prices keep declining. Strategists recommend going long on USD/CAD at current levels, targeting at C$1.0528 and with a stop at C$0. 9950. Specialists note that raw materials account for half of Canada’s export revenue. The CRY (CRB) commodity index fell below 281 (the lowest level since September 2010). Moreover, specialists at Bank of America forecast a further decline to 257 in a near-term. Net long positions on the Canadian dollar declined twofold (70K on May 4 vs. 38K on May 22). According to analysts, net longs were opened in February - March when the pair was trading at C$1.0053-0.9700. As a result, a further downward movement of the cross is expected. Chart. Daily USD/CAD Bank of America: comments on USD/CAD // FBS Markets Inc.

Commerzbank: USD/CHF broke above resistance Wednesday, May 30, 2012 - 11:18 Technical analysts at Commerzbank note that the greenback has at last managed to overcome resistance in the 0.9572/95 area (January maximums) trading versus Swiss franc, so the pair USD/CHF reached new 2012 highs and March 2008 minimum at 0.9636. The specialists think that US currency may climb to 0.9950. In their view, support for the pair will be found at 0.9529/00 (May 28 minimum, May 18 maximum), 0.9368/35 (May 22 minimum, March maximums) and 0.9478 (Ichimoku Cloud support at H4 chart). Chart. Daily USD/CHF Commerzbank: USD/CHF broke above resistance // FBS Markets Inc.

Gloomy days for the euro area Wednesday, May 30, 2012 - 07:14 The fundamentals for the single currency remain bad and the majority of experts see EUR/USD declining to $1.20 or even to the parity level. For example, Commerzbank targets 55-month MA at $1.2067. Euro tries to edge up this week as the Greece's pro-bailout parties regained an opinion poll lead ahead of the elections on June 17, but failed to overcome resistance at $1.2625 (January minimums) showing that the bulls are extremely weak. More negative news added to the poor sentiment such as the problems with Spanish banks recapitalization and the nation’s downgrade by Egan-Jones Ratings. Some specialists say that there may be some positive developments at EU summit on June 13, just a few days ahead of the Greek elections, as the European authorities will feel the need to something to persuade Greeks say ‘yes’. Most Greeks want to see the terms of an international financial rescue revised even as they acknowledge that not abiding by austerity measures required for the funds may lead to the country leaving the euro area. Societe Generale notes that the situation in Greece is already terrible: unemployment reached 21.7%, while GDP is contracting by 7.7%. The biggest Greek lender NBG claims that is the nation leaves the currency union, its GDP will contract by at least 22%, jobless rate – rise to 34%, inflation – climb to 32% and lending rates – surge to 37% with new drachma devalued by around 65%. In the nearer term the markets will be looking at ECB’s meeting next week. Analysts at Standard Chartered claim that the central bank to cut its benchmark rate one more time by 25 bps to 0.75% in Q3 before going on hold. Chart. Weekly EUR/USD Gloomy days for the euro area // FBS Markets Inc.

Key options expiring today Wednesday, May 30, 2012 - 06:22 Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT). Here are the key options expiring today: EUR/USD: $1.2450, $1.2475, $1.2600, $1.2675 and $1.2700; USD/JPY: 79.50 and 80.00; EUR/JPY: 100.00; AUD/USD: $0.9705 and $0.9800; GBP/USD: $1.5650, $1.5735 and $1.5800; EUR/GBP: 0.8000; USD/CAD: 1.0200. Photo by Reuters Key options expiring today // FBS Markets Inc.

May 30: economic background Wednesday, May 30, 2012 - 05:47 The pair EUR/USD has once again renewed 2-year minimum versus the greenback and tested today the levels below $1.2500. The market’s focus has slightly shifted from Greece to Spain. The Financial Times reported citing unidentified officials that the ECB rejected the plan of Spanish government to recapitalize BFA-Bankia, the nation’s third- biggest lender, which has been nationalized earlier this month through an injection of treasury debt instead of cash. Spanish 10-year bond yields rose yesterday to the maximal level since November getting close to the critical level of 7%. Risk sentiment was also affected by the fact that Chinese authorities have no plan to introduce large-scale stimulus measures to support growth. AUD/USD dipped below $0.9800. Aussie was also hurt by discouraging retail sales data (-0.2% m/m in April). USD/JPY is little changed for the second day trading just under downtrend resistance line. Events to watch today: Switzerland: KOF Economic Barometer index is forecasted to increase to 0.44 in May, indicating that the Swiss Economy is headed towards an expansion in 2012. Euro zone: Italy holds a 10-year bond auction. The previous one, which took place a couple of weeks ago, went well, but the interest rate reached 5.66%. Later in the day ECB President Mario Draghi will be speaking in Brussels and may unveil the central bank's position ahead of the rate decision next week. US: Pending home sales in April are expected to remain unchanged after a 4.1% surge in March. May 30: economic background // FBS Markets Inc.

USD/JPY: technical comments Tuesday, May 29, 2012 - 21:06 The USD/JPY cross keeps trading on a downside despite the fact that today it edged a bit higher once again. Analysts at Standard Chartered expect USD/JPY to stay between 79.00 and 81.00 yen until the risk sentiment improves. In their view, the pair may rise to 83.00 yen on positive Greek vote results, improved U.S. economic data and a monetary policy easing from Bank of Japan. Strategists at UBS opine the Bank may intervene if USD/JPY falls below 78.00. Support: 79.35 (May 24 minimum); 79.21 (May 23 minimum); 79.16 (61.8% Fibonacci retracement from Jan. – Feb. rally); 79.06 (May 21 minimum). Resistance: 79.83 (May 25 maximum); 80.08 (May 23 maximum); 80.15 (May 22 maximum). Early Tuesday a bunch of important data was released in Japan. Unemployment rate slightly increased in April to 4.6%. Japan’s retail sales keep rising for 5th consecutive month (a 5.8% growth), while household spending – for 3rd consecutive month (a 2.6% growth). Later this week watch for Japan’s data releases: • Wednesday: manufacturing PMI; BoJ Governor M.Shirakawa speaks • Thursday: preliminary industrial production; housing starts • Friday: capital spending Chart. Daily USD/JPY USD/JPY: technical comments // FBS Markets Inc.

RBS: trading GBP/USD Tuesday, May 29, 2012 - 19:52 Analysts at RBS recommend going long on GBP/USD targeting at $1.5820/1.5929 and with a stop at $1.5606. In their view, the downtrend of the cable has definitely slowed down. According to specialists, it’s too early to tell the trend has become bullish, because the signs of improvement are too modest. However, a close above $1.5674 (current level and a 5-day МА) would indicate a trend reversal. Support: 1.5666 (38.2% Fibonacci retracement from a Jan.-Feb. rally); 1.5606 (March minimum); 1.5580 (50% Fibonacci retracement); 1.5504 (61.8% Fibonacci retracement). Resistance: 1.5767 (23.6% Fibonacci retracement); 1.5820 (strong March support); 1.6000 (psychological). Chart. Daily GBP/USD RBS: trading GBP/USD // FBS Markets Inc.

Markets keep choosing US dollar Tuesday, May 29, 2012 - 17:11 The greenback has risen against its 16 major counterparts from last year low in July. These days CDS on the U.S. debt are trading less than 100 b.p., indicating the risk is close to zero. The greenback remains resilient even despite the two rounds of quantitative easing, launched by the Fed between December 2008 and June 2011. However, the main driver for the U.S. dollar’s strength is the sharp decline of the single currency. The resumed uncertainty in the euro zone saps the demand for euro-denominated debt on account of the low quality of the assets. Moreover, the need of the financial institutions to comply with Basel III standards also supports the greenback. In the last quarter of 2011 the dollars share in the global foreign-exchange reserves surged to 62% (maximum since June 2010). According to analysts, euro may rebound before June 17 (Greek elections), because these days it is strongly oversold. However, in a longer period EUR/USD is expected to resume the downtrend. Chart. Allocated foreign exchange reserves in US dollars Markets keep choosing US dollar // FBS Markets Inc.

GBP/JPY may keep declining Tuesday, May 29, 2012 - 09:24 Technical analysts at Gaitame.com Research Institute expect British pound to lose more versus Japanese yen. The specialists point out that GBP/JPY is now hovering right above 200-day MA in the 124.20 area. If sterling breaches this support, the pair will drift down to 123.48 (61.8% Fibonacci retracement of the advance from January 13 minimum to March 21 maximum) and 122.77 (December 22 maximum). Chart. Daily GBP/JPY GBP/JPY may keep declining // FBS Markets Inc.

Standard Chartered lowered forecast for EUR Tuesday, May 29, 2012 - 08:34 Economists at Standard Chartered claim that Greece is now more likely to leave the euro area than to stay in it. In their view, that means that the current recession in Europe may deepen. Such assumptions made the specialists revise down their forecasts for EUR/USD by the year-end from $1.32 to $1.18. According to the bank, euro will hit this mark if Greece is the only nation to leave the currency bloc. If other problem nations depart, the single currency may slump to $1.08 by the end of 2012. At the same time, Standard Chartered still believes that the latter won’t happen as the European Central Bank and other member countries will come up with an effective firewall to stop the contagion after Greece quits euro. The analysts think that the ECB would respond to a Greek exit through significant monetary easing, so euro will surely keep depreciating. Chart. Weekly EUR/USD Standard Chartered lowered forecast for EUR // FBS Markets Inc.

Key options expiring today Tuesday, May 29, 2012 - 07:04 Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT). Here are the key options expiring today: EUR/USD: $1.2500 (large), $1.2550, $1.2625, $1.2630, $1.2650, $1.2700; USD/JPY: 79.00, 79.25, 79.30, 80.00, 81.00; EUR/GBP: 0.8000; AUD/USD: 0.9860, 0.9865, 0.9875, 0.9900, 0.9950; USD/CAD: 1.0230. Photo from Reuters Key options expiring today // FBS Markets Inc.

Citigroup: trading GBP/AUD Tuesday, May 29, 2012 - 07:04 Analysts at Citigroup recommend going long on the sterling against the Australian dollar. In their view, GBP/AUD may fall to A$1.53 (50% Fibonacci retracement from Feb. 15 - May 23 rally). According to specialists, the Aussie is currently oversold due to risk aversion (last week number of short positions on AUD/USD reached its maximum since September 2008). Analysts underline that before the selloff, started on May 23, market participants went long, but now the situation seems to change. Chart. Daily GBP/AUD Citigroup: trading GBP/AUD // FBS Markets Inc.

May 29: currencies in focus Tuesday, May 29, 2012 - 06:29 Today’s trading day began with risk aversion. EUR/USD is testing $1.2500 on the downside staying close to 2-year minimum which was hit on Friday. GBP/USD is consolidating in the $1.5630/5730 area after last week’s sharp decline. AUD/USD dipped to 0.9800 as Australian markets fell, but then managed to return to 0.9860 during the Asian session. USD/JPY edged a bit higher once again approaching downtrend resistance line. A bunch of important data was released early Tuesday in Japan. Unemployment rate slightly increased in April to 4.6%. Japan’s retail sales keep rising for 5th consecutive month (a 5.8% growth), while household spending – for 3rd consecutive month (a 2.6% growth). CHF retains its strength despite the SNB’s President Thomas Jordan yesterday hinted at the possibility of introducing capital controls on foreign deposits, a measure which hasn't been used since the 1970s. This means that despite the threats of the nation’s monetary authorities traders still want to hold Swiss currency. Events to watch: Euro zone: Germany will announce key inflation results for May: experts anticipate 0.1% decline. Italy holds a T-bill auction (the market will be also awaiting Italian 10-year bond auction tomorrow). Britain: CBI index of retail sales may fall from -6 in April to -7 in May. US: Case-Shiller HPI is seen losing 2.7% in March (y/y). CB consumer confidence in May is forecasted to reach 69.6, indicating a general optimism. In April consumer confidence fell to 69.2 while was expected to reach 69.9. The small decrease was caused by a moderation in consumers’ short-term outlook despite improvement in current conditions assessments. May 29: currencies in focus // FBS Markets Inc.

BBH: Aussie’s prospects may improve Monday, May 28, 2012 - 21:29 Today Australian dollar bounced versus its US counterpart on improved risk sentiment. Analysts at Brown Brothers Harriman claim that Australian dollar has poor prospects on the fundamental part as the markets remain all in all in the risk-aversion mode and expect more easing by the Reserve Bank of Australia. At the same time, the specialists underline that AUD/USD didn’t breached support provided by November minimums in the 0.9660 area, although euro hit 2-year low an equities declined. If Aussie manages to hold for a while, the outlook for the pair will become better as some technical indicators may turn in its favor. Resistance for AUD lies in the 0.9930 zone (May 22 maximum). There’s also resistance at 0.9875 (Ichimoku Cloud at H4 chart). Chart. Daily AUD/USD BBH: Aussie

Commerzbank: comments on EUR/USD Monday, May 28, 2012 - 11:55 Here’s another piece of bearish comments about EUR/USD. Technical analysts at Commerzbank point out that the single currency closed last week at below the 78.6% Fibonacci retracement of its move from June 2010 minimum to 2011 May maximum. The specialists also note that one may spot some divergence of the daily RSI. All this means that that there will be a decline after a slight rebound. Resistance for EUR/USD is found at $1.2681 and $1.2796/1.2825 (interim maximum and Fibonacci retracement of advance from January minimums to February maximums). Support lies at $1.2490 and $1.2067 (55-month MA). In the longer term euro could target $1.1876 (2010 minimum) and $1.1641 (2005 minimum). Chart. Daily EUR/USD Commerzbank: comments on EUR/USD // FBS Markets Inc.